SAN CARLOS -- PG&E should be fined nearly $6.8 million -- the maximum allowable by law -- because the embattled utility failed to promptly and properly notify regulators about incorrect records related to a natural gas pipeline beneath San Carlos, a state hearing officer proposed Wednesday.

The fines were proposed in connection with PG&E's erroneous records related to Line 147 beneath San Carlos and two other natural gas pipelines on the Peninsula, according to the proposal issued by state Public Utilities Commission Administrative Law Judge Maribeth Bushey. The records provided incorrect information about the maximum allowable pressure for Line 147.

PG&E's faulty records were found to be a key cause of the 2010 gas explosion in San Bruno that killed eight people and destroyed 38 homes. When flawed records also emerged in connection with Line 147 in San Carlos, it raised fresh questions about the safety and condition of the utility's pipeline network.

"Natural gas transmission safety by PG&E has been one of the commission's highest priorities for three years," Bushey wrote in her decision.

"The management and legal decision-making regarding the treatment of the discovery of errors (related to Line 147) is profoundly disheartening. It reflects a lack of candor and appreciation of the public interest."

The full PUC will make a final decision on the fine.

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"We are reviewing the proposed decision," said Brittany Chord, a PG&E spokeswoman. "We will respond according to the process set by the PUC."

San Francisco-based PG&E also issued a third-quarter earnings report on Wednesday that showed the company earned $161 million, down 55 percent from the year before. PG&E said its profits were eroded by a $196 million charge to pay for gas pipeline upgrades and improvements.

The proposed $6.75 million fine resulted in a penalty of $50,000 a day for 105 days during which PG&E failed to notify the PUC and interested parties about the errors in the records for the pipe, as well as $50,000 a day for a 30-day period for filing a document with a "misleading" title.

"I'm glad the PUC is holding PG&E accountable for its actions, but this is for a paperwork violation, not a safety violation," said state Sen. Jerry Hill, who represents a portion of San Mateo County. "This still doesn't show the PUC is taking gas pipeline safety seriously. The PUC must still prioritize safety and fines for safety violations."